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LatinNews Daily - 19 November 2020

In brief: Fitch warns on Brazil’s fiscal situation

* International ratings agency Fitch Ratings has affirmed Brazil’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BB-’, maintaining the 'negative' outlook it had given Brazil’s rating in May. “The Negative Outlook reflects the severe deterioration in Brazil’s fiscal deficit and public debt burden during 2020 and persisting uncertainty regarding fiscal consolidation prospects, including the sustainability of the 2016 spending cap”, Fitch said in a statement. “Brazil’s fiscal position has deteriorated sharply in 2020”, the ratings agency declared, projecting that the general government deficit will close this year at 16.7% of GDP, and that government debt will rise to 95% of GDP. Fitch stressed the uncertainty around the government’s ability to meet the spending cap next year, notably amid discussions on new social measures and talk in political circles of bypassing the spending cap. “In Fitch’s view, flexibilisation of the spending cap to accommodate new spending initiatives could undermine the fiscal anchor and damage market confidence”, the statement warned.   

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